Exposure Draft - ACRA

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CODE OF PROFESSIONAL CONDUCT AND ETHICS FOR PUBLIC ACCOUNTANTS Making arrangements so that personnel providing such services do not participate in the assurance engagement; Involving an additional professional accountant to advise on the potential impact of the activities on the independence of the firm and the assurance team; or Other relevant safeguards set out in national regulations. 290.162 New developments in business, the evolution of financial markets, rapid changes in information technology, and the consequences for management and control, make it impossible to draw up an all-inclusive list of all situations when providing nonassurance services to an assurance client might create threats to independence and of the different safeguards that might eliminate these threats or reduce them to an acceptable level. In general, however, a firm may provide services beyond the assurance engagement provided any threats to independence have been reduced to an acceptable level. 290.163 The following safeguards may be particularly relevant in reducing to an acceptable level threats created by the provision of non-assurance services to assurance clients: (a) Policies and procedures to prohibit professional staff from making management decisions for the assurance client, or assuming responsibility for such decisions. (b) Discussing independence issues related to the provision of non-assurance services with those charged with governance, such as the audit committee. (c) Policies within the assurance client regarding the oversight responsibility for provision of non-assurance services by the firm. (d) Involving an additional professional accountant to advise on the potential impact of the non-assurance engagement on the independence of the member of the assurance team and the firm. (e) Involving an additional professional accountant outside of the firm to provide assurance on a discrete aspect of the assurance engagement. (f) Obtaining the assurance client‘s acknowledgement of responsibility for the results of the work performed by the firm. (g) Disclosing to those charged with governance, such as the audit committee, the nature and extent of fees charged. (h) Making arrangements so that personnel providing non-assurance services do not participate in the assurance engagement. 290.164 Before the firm accepts an engagement to provide a non-assurance service to an assurance client, consideration should be given to whether the provision of such a service would create a threat to independence. In situations when a threat created is other than clearly insignificant, the non-assurance engagement should be declined unless appropriate safeguards can be applied to eliminate the threat or reduce it to an acceptable level. 63
CODE OF PROFESSIONAL CONDUCT AND ETHICS FOR PUBLIC ACCOUNTANTS 290.165 The provision of certain non-assurance services to financial statement audit clients may create threats to independence so significant that no safeguard could eliminate the threat or reduce it to an acceptable level. However, the provision of such services to a related entity, division or discrete financial statement item of such clients may be permissible when any threats to the firm‘s independence have been reduced to an acceptable level by arrangements for that related entity, division or discrete financial statement item to be audited by another firm or when another firm re-performs the nonassurance service to the extent necessary to enable it to take responsibility for that service. Preparing Accounting Records and Financial Statements 290.166 Assisting a financial statement audit client in matters such as preparing accounting records or financial statements may create a self-review threat when the financial statements are subsequently audited by the firm. 290.167 It is the responsibility of financial statement audit client management to ensure that accounting records are kept and financial statements are prepared, although they may request the firm to provide assistance. If firm, or network firm, personnel providing such assistance make management decisions, the self-review threat created could not be reduced to an acceptable level by any safeguards. Consequently, personnel should not make such decisions. Examples of such managerial decisions include: (a) Determining or changing journal entries, or the classifications for accounts or transaction or other accounting records without obtaining the approval of the financial statement audit client; (b) Authorizing or approving transactions; and (c) Preparing source documents or originating data (including decisions on valuation assumptions), or making changes to such documents or data. 290.168 The audit process involves extensive dialogue between the firm and management of the financial statement audit client. During this process, management requests and receives significant input regarding such matters as accounting principles and financial statement disclosure, the appropriateness of controls and the methods used in determining the stated amounts of assets and liabilities. Technical assistance of this nature and advice on accounting principles for financial statement audit clients are an appropriate means to promote the fair presentation of the financial statements. The provision of such advice does not generally threaten the firm‘s independence. Similarly, the financial statement audit process may involve assisting an audit client in resolving account reconciliation problems, analyzing and accumulating information for regulatory reporting, assisting in the preparation of consolidated financial statements (including the translation of local statutory accounts to comply with group accounting policies and the transition to a different reporting framework such as International Financial Reporting Standards), drafting disclosure items, proposing adjusting journal entries and providing assistance and advice in the preparation of local statutory 64
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Exposure Draft - ACRA

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